What it takes for a startup to scale up with $0 VC funding

Startup founders are often heard saying they are good to start with in bootstrapped mode but need funding to scale up. But, Sridhar Vembu, founder of cloud software company Zoho has proved this theory wrong. Zoho started and scaled up too with $0 VC funding. Vembu, an alumnus of IIT-Madras started Zoho in 1996 after working for only two years in Qualcomm.

What’s the secret sauce that has made this possible for Zoho. Vembu says, it’s simplicity. “Frugality has been in our DNA,” he says. He says many startup founders go wrong in over-spending in swanky offices and high salaries from the very beginning. For Zoho, it has always been about simplicity that did the trick. “It required a lot of discipline initially,” Vembu says.

One look at Vembu and he overtly displays simplicity and frugality. For instance, you would never see him in formals or wearing a suit and tie, not even in formal events such as press conferences. He’s always seen in his faded pair of denims, T-shirt, and leather chappals. That is practicing what you preach.

From a humble beginning, today Zoho is reasonably big. It clocked revenues of Rs 1 ,557 crore (approximately $240 million) in fiscal 2016, according to company intelligence platform Tofler. “We don’t confirm or deny the revenue numbers,” says Vembu. Its last press conference was held at ITC Grand Chola, a luxurious 5-star hotel in Chennai. Now, it can afford to host in such places. But, it must be noted that earlier, most of them used to be hosted at the company’s premises in Vallancherry Village, Kanchipuram District near Chennai.

Last year, Zoho announced a new development centre in Tenkasi, one of the municipalities in the Tirunelveli district of Tamil Nadu about 600 kilometres from the capital city of Chennai. The Tenkasi centre also reflects the ‘frugality in the DNA’ concept of Zoho. Vembu wants to generate jobs in smaller towns. He consciously stays out of the metro cities. “I don’t want to add to the traffic problems,” he says. As part of its next growth phase, Zoho is looking to expand into tier 2 and tier 3 cities, that are currently untapped.

Zoho’s tagline says, “Made in India, made for the world.” Today, US is the largest market for Zoho and India is among the top five markets. However, Vembu says that in the next five years, India could emerge as its second largest market, and in 15 years, it could be the largest market overtaking the US. As India continues to emerge as an important market for the company, Zoho is setting up two data centres in the country by the end of this year. It currently has six data centres – two each in the US, Europe, and China. It is also working on building capabilities in various local Indian languages.

Most recently on July 25, Zoho announced the launch of Zoho One, a product suite that offers a single-sign-on access to cloud software for sales, marketing, customer support, accounting, HR, productivity, collaboration, and business analytics. According to Vembu, this product was inevitable and a culmination of 10 years of work.

Zoho believes in creating its talent pool inhouse from Zoho University by training college dropouts and underprivileged children, with the latest technologies. Broadly speaking, anyone who passes their aptitude and analytical skills test can be admitted into the university. “Age is the only minimum qualification where they have to be at least 17-18 years,” Vembu says. Currently, about 15% of Zoho employees are from Zoho University. The absorption rate is nearly 100%.

“Zoho University gives us a spiritual advantage,” Vembu says. In India, where 80% of people don’t have access to basic facilities which we take for granted, Zoho University helps us achieve a larger purpose in life, he signs off.

TID BIT: By the way, ever wondered, where did the name Zoho come from? Well, when Vembu was starting out, he was looking for a “nice” and “catchy” name for an internet offering like theirs, they tried Soho. The domain wasn’t available, and thus Zoho was born. “We paid at $5,000 premium for the name and I guess it was worth it,” Vembu says.

Ayushman Baruah is the founder & Editor-in-Chief of The Startup Observer. With 10+ years of rich experience in journalism spanning across newspaper, magazine, and news wire, Ayushman takes a conscious effort to stay away from the rat's race and the noise of breaking news. The Startup Observer is a noble initiative to serve the readers with ideas that go beyond news. In 2013, Ayushman won the prestigious 15th Annual PoleStar Award in jury's category for excellence in technology journalism. He loves writing, public speaking, observing, travelling, aquariums, and anything that makes him think. He believes in keeping his feet on the ground but eyes on the stars.